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About Growth & Justice

Growth & Justice is a progressive think tank committed to making Minnesota's economy simultaneously more prosperous and fair. We believe that at a time of deep partisan division, Minnesotans can unite around one goal: a strong and growing state economy that provides a decent standard of living for all.

April 15, 2008

Like politics, all taxes are local.

When Minnesotans argue about taxes, we usually start with the personal state income tax, which is used to support the persistent claim that we're one of the highest-taxed states in the nation. (Dane Smith deals with that here; the Minnesota Taxpayers Association recently ranked

Minnesota

23rd for state and local taxes as a percentage of income. Looking solely at state income tax also pushes Minnesota higher in the rankings because other states raise more revenue at the local level.)

Severance taxes on mining have far less visibility in Minnesota, because we derive such a small portion of annual revenues from taconite extraction (in the $7 million range). By contrast, Alaska funds about half its state budget from oil revenues, and Wyoming is close behind. These resource-based taxes have the added advantage of "exporting" some of the state's tax burden as the oil, gas, coal and other minerals are paid for by others.

What Pawlenty and many outside the Iron Range often fail to understand
is that our taconite tax revenue, while significant during good times
(and not all times are good), is not a secret pot of cash that we use
to buy beer and ammunition. It is what mining companies pay IN LIEU of
PROPERTY TAX. Mines own or lease thousands of acres of enormously
valuable land in northern Minnesota and they don't pay a dime in
property tax. Suburbs raise their revenue from those sleek office
buildings along the freeways and in overpriced residential homes. The
Iron Range raises its school and community funds from taconite taxes,
and per capita we get less money over time as a result. But wait,
there's more. All the while over Range history a portion of these
taconite taxes have gone to the state general fund or to the University
of Minnesota fund, money that has benefited more than a million people
who couldn't find the Iron Range on a map.

Gov. Pawlenty frequently laments any Iron Range project or program that
doesn't rely exclusively on our taconite taxes. We aren't deserving of
general state funds, because of our financial privilege. (Anyone who
has been to my native Iron Range understands my implied sarcasm).

There are good reasons to have a mixed basket of revenues (fairness, more stable revenue sources). But instituting an array of taxes and fees can lead to undesirable effects, too (obscuring who's paying for government, dedicating funds to narrow purposes that restrict flexibility in tough times).

One side effect of the anti-tax climate in the state has been to build credence for the consumerist notion that every tax dollar should be earmarked for a purpose that benefits the person or corporation paying in. In one sense, like politics, all taxes are local, but this mentality can only reduce the kind of wealth-building investment in education and infrastructure that benefits all Minnesotans.

Government should be accountable for spending, of course. But accountability is about measuring what the money does, not just remembering where it came from.